Good article in WSJ by Paul Backer Taleb

[misean]

http://online.wsj.com/article/SB1000...311383448.html

"Modernity has been obsessed with comfort and cosmetic stability, but by making ourselves too comfortable and eliminating all volatility from our lives, we do to our bodies and souls what Mr. Greenspan did to the U.S. economy: We make them fragile. We must instead learn to gain from disorder."

[Lucille]

Love Taleb! I need to get DH his new book for Christmas. This was my reminder!

Rule 3: Small is beautiful, but it is also efficient.

Experts in business and government are always talking about economies of scale. They say that increasing the size of projects and institutions brings costs savings. But the "efficient," when too large, isn't so efficient. Size produces visible benefits but also hidden risks; it increases exposure to the probability of large losses. Projects of $100 million seem rational, but they tend to have much higher percentage overruns than projects of, say, $10 million. Great size in itself, when it exceeds a certain threshold, produces fragility and can eradicate all the gains from economies of scale. To see how large things can be fragile, consider the difference between an elephant and a mouse: The former breaks a leg at the slightest fall, while the latter is unharmed by a drop several multiples of its height. This explains why we have so many more mice than elephants.

So we need to distribute decisions and projects across as many units as possible, which reinforces the system by spreading errors across a wider range of sources. In fact, I have argued that government decentralization would help to lower public deficits. A large part of these deficits comes from underestimating the costs of projects, and such underestimates are more severe in large, top-down governments. Compare the success of the bottom-up mechanism of canton-based decision making in Switzerland to the failures of authoritarian regimes in Soviet Russia and Baathist Iraq and Syria.

Small is beautiful!

Whenever something is wrong, something is too big.
~ Leopold Kohr

Recent events in Japan bring to mind Leopold Kohr’s book, The Breakdown of Nations, wherein he develops the "size theory of social misery." In words that help to explain the processes of decentralization that are transforming vertically-structured organizations into horizontal networks, Kohr tells us that "only relatively small bodies – though not the smallest, as we shall see – have stability. . . .Beyond a certain size, everything collapses or explodes." He adds that "the instability of the too large . . . is a destructive one. Instead of being stabilized by growth, its instability is emphasized by it." [Emphasis in original.] An economist of Austrian birth, and with a strong anarchist bent, Kohr was a great influence on E.F. Schumacher, best known for his book, Small Is Beautiful.